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On February 24, 2012, the U.S. Army Engineering & Support Center issued a draft request for proposals for renewable and alternative energy (the "Draft RFP"). Since posting our initial blog and Energy Law Alert, we have received a number of inquiries about the details of the solicitation. Below are answers to some of the most frequently asked questions.

FAQ on Army's $7 Billion Draft RFP for Renewable Energy

A1: No. It is only a draft. The Draft RFP can be found here. The Army is accepting comments until March 21, 2012. Comments can be submitted via the ProjNet website here.

Q2: When will the Army issue the final RFP and what form will it take?

A2: The Draft RFP does not set a date for release of the final RFP, which will take the form of a Multi-Award Task Order Contract (the "MATOC/Final RFP"). For those unfamiliar with the MATOC process, it is very important to understand four fundamental things: (1) the MATOC will not likely offer the opportunity to bid on any specific project (i.e., a "seed project") because the Draft RFP covers multiple technologies, (2) the Army will grant multiple awards under the MATOC, (3) awards granted under the MATOC give awardees theright to bid on individual Task Order contracts issued by specific facilities for specific projects (e.g., a Task Order for a 10 MW solar PV project at Joint Base Lewis-McChord in Washington), (4) parties that are not awardees in the MATOC process may not bid on these Task Orders. Thus, a developer must be an awardee under the MATOC/Final RFP in order to have the right to bid on individual project development opportunities. Before issuing the MATOC/Final RFP, the Army will need to complete its review of all of the comments that it receives by the March 21 deadline. At some point after the MATOC/Final RFP is published, the Army will host a pre-proposal conference in Huntsville, Alabama where participants will hear presentations regarding the program, the scope of work, contractual considerations, and small-business considerations.

Q3: Is the Department of Defense really mandated to procure 25% of its electricity from renewable resources by 2025?

A3: No. Section 2852 of the National Defense Authorization Act of 2007 (Pub. L. No. 109-364) codifies the Department of Defense's ("DoD") voluntary goal to produce or procure 25% of its total electricity consumption from renewable energy sources by 2025. This is not a Congressional mandate; however, the DoD is taking the goal very seriously. On August 10, 2011, the office of the Assistant Secretary of the Army for Installations, Energy & Environment ("ASA IE&E") issued an information paper announcing the formation of the Energy Initiatives Office Task Force ("EITF"). The job of the EITF would be (and now is) to serve as the central managing office for large-scale Army renewable energy projects. In that information paper, the Army estimated that an investment of up to $7.1 billion over the next 10 years would be required to procure 2.1 million megawatt-hours ("MWh") annually to meet Army goals and federal mandates, and to provide enhanced energy security. The Draft RFP is the next step in meeting those objectives.

Q4: What quantities of generating capacity, in installed megawatts ("MW"), is the Army looking to procure through power purchase agreements ("PPA") or equivalent contracts in each of the four categories (wind, solar, biomass, geothermal)?

A4: The Draft RFP sets out specific quantities of power, in total kilowatt-hours ("kWh") that the Army intends to procure through each of four types of contracts: (1) Solar PPA, (2) Wind PPA, (3) Biomass PPA, and (4) Geothermal PPA. The Draft RFP also states that applicants are to assume the period of performance of those contracts is 30 years. If the proposed procurement quantities are to be delivered over 30 years, and assuming a range of capacity factors for each technology type, we anticipate that the total installed MW of each to fall somewhere in the following ranges:

Technology

Porposed
Procurement
(kWh)

Assumed Capacity
Factor

Projected Total
Installed Capacity
(MW)

Solar

1,500,000,000

12-18%

31.7 - 47.6

Wind

9,000,000,000

20-40%

85.6 - 171.2

Biomass

19,000,000,000

40-50%

144.6 - 180.8

Geothermal

8,000,000,000

60-70%

43.5 - 50.7

We note that the total procurement quantity (37.5 million MWh), if delivered in equal amounts over 30 years, would yield an annual procurement of 1.25 million MWh. This number is slightly more than half of the annual procurement that the ASA IE&E, in its August 10, 2011 information paper, estimated would be required to meet the Army's renewable energy needs.

Q5: Is there a minimum or maximum project size?

A5: The Draft RFP does not specify project sizes, only the aggregate procurement quantity for each technology type. The MATOC/Final RFP, when released, will result in multiple indefinite delivery/indefinite quantity ("ID/IQ") contracts with a portion of the awards reserved for small businesses (for details on what size projects are reserved for small businesses, see our February 28, 2012 blog or February 29, 2012 Energy Law Alert). The capacity within these ID/IQ contracts (e.g., the 1.5 million MWh capacity proposed for solar) will be shared using the fair opportunity process (a procedure under federal acquisition law) subject to a few restrictions. Specific project sizes, specific site requirements, and government-specific facility requirements will be specified by individual facilities in their Task Order requests for proposals that will be issued against the MATOC.

Q6: Where can a project be located?

A6: Projects may be located on "any federal property located within the Continental United States including Alaska, Hawaii, territories, provinces or other property under the control of the United States Government" for the period of the contract, or "on any properties available for use by the [developer] that are in the proximity of the . . . federal property" to which the electricity will be delivered. Although this response sounds like "anywhere," individual facility Task Orders may set out specific site requirements and Government-specific facility requirements that could impact the facility's location.

Q7: Does the Army want to buy renewable energy facilities that developers build for it?

A7: No. The Army wants to enter into long-term PPAs or equivalent contracts only. Developers will be responsible for all aspects of operating and maintaining the facilities.

Q8: Can a developer sell the energy to the Army and keep the renewable energy credits ("RECs")?

A8: No. Army policy currently requires that RECs "resulting from the renewable energy generated on-site to remain with the Government." What constitutes "on-site" is unclear, however. Projects may be located on "any federal property" or "on any properties available for use by the [developer] that are in the proximity of the . . . federal property." Because the Draft RFP specifically states that it is the government's intent to use the RECs to meet its renewable energy procurement target, we expect that all individual contracts will require that the government receive the RECs. However, prospective bidders may wish to seek confirmation of this point in comments submitted to the Army.

Q9: What types of facility qualify as "biomass"?

A9: "[A]ll technologies that utilize organic material to generate a fuel or energy such as, but not limited to, Biomass-to-Power, Waste to Energy, Refuse Derived Fuels, bio-fuels, etc." Due to the variability in available waste streams and the type of system required to convert the material to a usable form of energy, the technology-specific requirements will be provided in each individual Task Order request for proposals.

Q10: Can technologies other than solar, wind, biomass, and geothermal be bid in?

A10: The Draft RFP is unclear on this point. The draft sets out specific procurement quantities only for solar, wind, biomass, and geothermal technologies. However, Section C.4.h. defines "[a]lternative energy technologies" to mean "all other future renewable and current and future alternative technologies . . . [which] may include such items as fuel cells, ground source heat pumps, thermal recovery systems, ocean oscillation power generation systems, energy storage, batteries, micro-grids, etc." The draft RFP also has a very broad definition of "renewable energy," and it explicitly contemplates the possibility that combined heat and power or "alternative fuels" may be implemented. We recommend that developers of technologies that do not fit into one of the four prescribed procurement buckets file comments with the Army by the March 21 deadline asking whether the procurement will be strictly limited to the four technologies for which it has established kWh targets.

Q11: Could a bidder propose a cutting-edge technology?

A11: Probably not. The Draft RFP refers to "Commercial Technology," which "typically means a technology in general use in the commercial marketplace in the United States at the time the Task Order RFP is issued." The Draft RFP goes on to describe technologies "in general use" as those that have been used in three or more commercial projects in the United States in the same general application as in the proposed project, and each of those projects has been in commercial operation for at least five years. If a bidder has any doubt about whether the Army would view a given technology as commercial, the question may be a good one to raise in the bidder's comments.

Q12: What type of facilities is the Army targeting? Existing facilities? Greenfield development?

A12: Again, the Draft RFP is unclear on this point. While the document does not explicitly prohibit bids from existing renewable energy plants, the assumption appears to be that bids will come from facilities yet to be constructed.

Q13: What about National Environmental Policy Act ("NEPA") compliance?

A13: To reduce as much risk as possible to developers, the government intends to complete the requirements for NEPA compliance, to the extent practicable, before the issuance of a Task Order request for proposals for a particular facility. The government also intends to do the following before the issuance of a Task Order: (1) collect and share site data; (2) consult with the local utility company and utility regulatory authorities to ascertain and share constraints, procedures, and costs associated with grid interconnection; and (3) obtain necessary federal, state, and local agency approvals where possible.

Chad T. Marriott is an attorney who works with owners, investors, and project developers in the renewable energy and thermal power industries. He practices at Stoel Rives LLP, a leading full-service law firm that has been at the forefront of the electricity sector’s explosive growth in recent years. The firm’s services encompass all aspects of power project licensing, local permitting, financing, taxation, real estate, equipment procurement, construction, project acquisition and project operations throughout the United States and abroad. www.stoel.com.

The content & opinions in this article are the author’s and do not necessarily represent the views of AltEnergyMag

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